Why Google will destroy Yahoo

I love Yahoo. I think they’re good people and they have a terrific product that they’re making better every day. But Google is beating them at their own game.

Yahoo owns Overture, which arguably invented keyword advertising, the online ad segment with all the momentum right now. I am buying ads for a small regional site at five cents each on Google, with no monthly minimum. Yahoo will sell me those same keyword clicks for ten cents and a monthly minimum of $20.

Yahoo owns the number-two webmail service (after Microsoft’s Hotmail) and it’s very good. Until recently, Yahoo mail offered its users 2 megabytes of storage for free. Google announces (and still has in beta) a webmail service that offers 1,000 megabytes of storage for free. Yahoo responds by raising their limit to 100 megabytes, more than enough to keep their existing customers, but only 10% of what Google is offering.

Yahoo and Google are both great companies and I’m happy with my relationship with each of them.

But keeping your costs low is key to success on the Web, and I think Google has figured out something about keeping their costs low that even Yahoo (whom I’ve always thought of as cheapskates) can’t seem to approach.

Should we be worried about Yahoo?

3 thoughts on “Why Google will destroy Yahoo

  1. Actually Yahoo Mail was offering 4 MB free storage. Hotmail was offering 2 MB. They have both increased their storage size after Gmail was released.

  2. Actually, original Yahoo Mail subscribers were given 6 megabyte accounts, later reduced to 4. The original subscribers were grandfathered in when the limit was reduced, and retained their 6 megabyte limit. I have seen no increase in my 2 megabyte hotmail account – and, junk mail does not count against your limit on Yahoo, it does on Hotmail.

  3. It’s a free market and it would be unethical to hold on to weak companies where innovation is lacking, if Yahoo truly has something to offer then they will keep their subscribers and sign on more. If not then it doesn’t necessarily mean they will become broke or take the Netscape’s road.

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